TORONTO, CANADA -- (Marketwire) -- 03/15/13 -- Gabriel Resources Ltd. (TSX: GBU) ("Gabriel" or the "Company") announces the publication of its Annual Results and Fourth Quarter Management's Discussion and Analysis Report for the period ended December 31, 2012.
-- After political uncertainty throughout 2012, the parliamentary elections in December 2012 saw a new coalition Government ("USL") take a two thirds majority of parliamentary seats, a position enabling the USL to fully control both 'houses' (the Senate and the Chamber of Deputies) and to adopt important laws without the need for cross-party consensus.-- 62.5 percent of the voters participating in a regional referendum, also held in December 2012 ("Referendum"), voted in favor of the resolution to resume mining in the Apuseni Mountain region and specifically at the Rosia Montana Project ("Project"). Furthermore, over 78 percent of the eligible voters registered in the community of Rosia Montana reportedly voted in favor of the resolution. The Referendum was initiated by 35 local mayors as an independent, regulated and legal method to gauge the level of local public and community support for the restart of mining in the Apuseni Mountains.-- The first half of 2013 will be an important barometer to determine where projects, such as that at Rosia Montana, which are significant to the economic progression of Romania sit in the list of priorities for the new USL Government. The strong electoral mandate and parliamentary majority position that the USL Government now enjoys marks a departure from the past where coalitions have had to accommodate multiple political agendas. The Company views this apparent stability and strength of Government at the start of a four-year term, along with the establishment of a new Ministry for Infrastructure and Foreign Investments, as a positive basis for engagement on the Project.-- Permitting for the Project remains the core focus of the Company. While the Minister of Environment has reportedly noted that the Technical Analysis Committee ("TAC") review of the Environmental Impact Assessment ("EIA") will be re-initiated when matters such as environmental financial guarantees and relevant EU legislation have been adopted into law by Romania, the Company awaits formal clarification from the USL Government and the TAC. Gabriel remains unable to provide guidance on the time that it might take the TAC to vote on the EIA or to release its recommendation to the Government.-- The 18th positive court decision for the progress of the Project was achieved against 19 legal challenges to permitting, licensing and other Project matters since early 2010. However opponents to the Project have continued to register new legal challenges in the quarter against local, county and federal Romanian authorities that grant licenses, permits, authorizations and approvals for many aspects of the Project. The Company's 80.69 percent owned Romanian subsidiary, Rosia Montana Gold Corporation S.A. ("RMGC") will continue to work with those authorities to ensure the Project receives a fair and timely evaluation in accordance with Romanian and EU laws.-- On November 7, 2012 the Company filed a new National Instrument 43-101 compliant "Technical Report on the Rosia Montana Gold and Silver Project, Transylvania, Romania", authored by SRK Consulting (UK) Ltd. ("SRK") and effective as at October 1, 2012 ("Technical Report"), which presents updated capital and operating costs and revenue projections from those last published in March 2009.-- With the uncertainty created by ongoing political change in 2012, and only very recent re-engagement with the Government on the Project, the Company continues to scale back expenditure in most areas. Monthly net cash usage of $6.1 million in H1 2012 was reduced to $3.7 million in H2 2012 and $79.0 million of cash and cash equivalents was held at December 31, 2012.
Jonathan Henry, Gabriel's President and Chief Executive Officer, stated:
"Following the parliamentary elections and the positive result to the Referendum, both held in December 2012, we will continue the dialogue with the new Romanian Government regarding the economic, social, cultural and environmental benefits that the Project will bring to Romania. We look forward tofinalising the environmental permitting process for the Project to allow Gabriel to build Romania's first modern mine for the benefit of the country and all stakeholders."
Further information and commentary on the operations and results in the fourth quarter of 2012 and full financial year is given below. The Company has filed its Annual Consolidated Financial Statements and Management's Discussion & Analysis on SEDAR at www.sedar.com and each is available for review on the Company's website at www.gabrielresources.com.
Gabriel is a Canadian TSX-listed resource company focused on permitting and developing its world-class Rosia Montana gold and silver project. The exploitation license for the Project, the largest undeveloped gold deposit in Europe, is held exclusively by Rosia Montana Gold Corporation, a Romanian company in which Gabriel owns an 80.69 percent equity interest, with the 19.31 percent balance held by CNCAF Minvest S.A., a Romanian state-owned mining enterprise. Gabriel and RMGC are committed to responsible mining and sustainable development in the communities in which they operate. The Project is anticipated to bring over US$31 billion (at current gold prices) to Romania as potential direct and indirect contribution to GDP. The Project will generate thousands of employment opportunities. Gabriel intends to build a state-of-the-art mine using best available techniques and implementing the highest environmental standards whilst preserving local and national cultural heritage in Romania.
For more information please visit the Company's website at www.gabrielresources.com.
-- The net loss for the fourth quarter of 2012 was $2.5 million, and for the year ended December 31, 2012 was $11.4 million, or $0.03 per share.
Liquidity and Capital Resources
-- Cash and cash equivalents at December 31, 2012 totaled $79.0 million.-- The Company has been implementing its plans, initiated in May 2012, to reduce monthly costs until such time as the Government moves ahead with Project permitting. As a result, average monthly net cash usage of $6.1 million in H1 2012 was reduced to $3.7 million in H2 2012. Excluding Referendum activities the H2 2012 monthly average net cash usage was $3.3 million.
NI 43-101 Technical Report
-- On November 7, 2012 the Company filed a new National Instrument 43-101 compliant Technical Report, which presents updated capital and operating costs and revenue projections from those previously published in March 2009 ("2009 Report") within the context of the current environment for commodity, capital equipment and consumable prices.-- Overall the initial capital cost has increased from US$876 million in the 2009 Report to US$1.4 billion and the sustaining capital costs increased from US$366 million in the 2009 Report to US$571 million. Operating cash costs, estimated in accordance with standard industry practices and valid as at the third quarter of 2012, equate to some US$16.97 per tonne of ore processed, equivalent to US$399 per ounce of gold produced over the life-of-mine ("LoM"), including refining, transport, treatment, a four percent state royalty and net of silver credits.-- The economic analysis presented by SRK in the Technical Report, which considers the Proven and Probable Mineral Reserves planned to be mined and processed over a 16 year period at the Project, derived the following key post-tax, pre-finance LoM results at a gold price of US$1,200/oz and silver price of US$20/oz: -- Undiscounted cash flow US$3.6 billion; -- NPV at a 10% discount rate of US$865 million; -- IRR of 19.6%; and -- Payback of initial capital outlay in Year 4 of production.-- Including estimated interest, financing and corporate costs the Company estimates the capital required to bring the Project into production and to a position of positive cashflow is approximately US$1.54 billion.
-- 2012 saw Romania with four different governments under three different prime ministers. Intense domestic political infighting limited significantly the level of Government engagement on the Project. In May 2012 a parliamentary 'no confidence' vote opened the way for the USL, as the then political opposition, to form a new government. There were two national elections organized during the year; being local party elections in June and parliamentary elections in December. In addition, a national referendum was held in July to vote on the initiation of the process to remove the President from office, which fell short of the 50 percent turnout threshold required for the result to be legally binding, despite a significant majority voting for the President's dismissal.-- The local elections held on June 10, 2012 marked a significant victory for the USL, who not only gained control at most of the important city halls in Romania but also secured 36 out of 41 county council presidencies.-- On December 9, 2012, the parliamentary elections brought an overwhelming victory for USL, who gained two thirds of the parliamentary seats - a position enabling the USL to fully control both 'houses' (the Senate and the Chamber of Deputies) and to adopt important laws without the need for cross-party consensus. The new Parliament was invested on December 21, 2012. Victor Ponta retains his position as Prime Minister, albeit his cabinet has a slightly different structure with some of the former Ministries (including some relevant for the Project) being split and given different functional roles. This includes a new Ministry of Infrastructure Projects of National Interest and Foreign Investments to which, it has been reported by the Romanian national media, overall responsibility for approving the Project may be transferred.-- The permitting progress of the Project relies heavily on Government approval of the environmental permit ("EP") and the issuance, in accordance with due process and Romanian law, of various permits and approvals at local, county and federal levels of government. The USL Government has stated that it will analyze the Project in a transparent manner and based on an open and democratic dialogue, so that the decisions are in accordance with the national interest, environmental protection and European legislation. In particular, recent comments from both the Prime Minister and Minister for Environment reported in the Romanian media in 2013 on the status of permitting of the Project, have specifically focused on compliance with European Directives as key to its progression. The Company is confident that it can, and will, comply with its environmental obligations and looks forward to furthering discussions with the relevant Ministries on this topic.-- The Company's view is that the first half of 2013 will be an important barometer to determine where projects, such as that at Rosia Montana, which are significant to the economic progression of Romania, sit in the list of priorities for the new USL Government. The strong electoral mandate and parliamentary majority position that the Government now enjoys marks a departure from the past where coalitions have had to accommodate multiple political agendas. The Company views this apparent stability and strength of Government at the start of a four-year term, along with the establishment of a Ministry for Infrastructure and Foreign Investments, as a positive basis for engagement on the Project.-- On March 1, 2013, the United States Department of Commerce notified Gabriel of its decision to formally support the Company through the Commerce Department's Advocacy Center for International Trade, which coordinates US government resources and authority in support of international business opportunities that involve foreign government decision-makers. As part of such Advocacy assistance, Gabriel anticipates that the US government will assist the Company by communicating to the Romanian Government on behalf of Gabriel's commercial interest in Romania.-- The Company will continue to pursue a strategy of engagement with all stakeholders, to explain the critical importance of the Project as part of the sustained economic development for Romania, and its commitment to adhere to the highest standards on engineering, environmental, cultural and social matters.
-- During October 2012, a proposal was put before the Alba County Council for the organization of an advisory referendum in respect of the recommencement of mining in the Apuseni region and specifically at Rosia Montana, the location of the Project. The Referendum was organized for December 9, 2012, to coincide with the date for the parliamentary elections.-- The Referendum, which was conducted in adverse weather conditions, saw 62.5 percent of the participants vote in favor of the resolution to resume mining in the Apuseni Mountains and, specifically, mining at the Project. Furthermore, over 78 percent of the eligible voters registered in the community of Rosia Montana voted in favor of the resolution. While the Referendum turn-out was below the threshold of 50 percent of eligible voters required to validate the result, the overwhelming conclusion is a clear demonstration of the groundswell of public support for the Project and job creation, economic regeneration as well as responsible mining in the Apuseni Mountain region.
Project Ownership and Royalty Rates
-- The Company has held discussions with a number of ministries of previous Governments on the potential for a revised ownership interest in the Project, royalty rates for gold and silver production and the route to successful permitting of the Project.-- Since the USL Government came to power in 2012, the Company has had limited discussions with it in respect of Project ownership or royalty rates. However, in 2013 the Prime Minister has reportedly reiterated his view that progress on the permitting status of the Project needs to be aligned with an increase in the State's participation in the Project, through both ownership interest and royalty.
-- As a consequence of the recent political changes, the Company awaits further clarification from the USL Government and the TAC as to the next steps in its environmental review process. While the Minister of Environment has reportedly noted that the TAC review will be re- initiated when matters such as technical guidelines for the implementation of environmental financial guarantees and environmental liabilities enforcement consistent with EU legislation have been adopted into law by Romania, the Company awaits formal clarification from the USL Government and the TAC as to the next steps in its review process. Gabriel remains unable to provide guidance on the time that it might take the TAC to vote on the EIA or to release its recommendation to the Government. Ultimately, the EP must be approved by a Cabinet decision of the Government prior to its issuance.-- The permitting progress of the Project relies heavily on Government approval of the EP and the issuance, in accordance with due process and Romanian law, of various permits and approvals at local, county and federal levels of government. The USL Government has stated it will re- analyze the Project in a transparent manner, based on an open and democratic dialogue, so that the decisions are in accordance with the national interest, environmental protection and European legislation. The Company is looking forward to having an open dialogue with the Government to understand and discuss any and all issues and concerns in relation to the Project.-- As result of the ongoing delays to the permitting process, two of the 19 endorsements to the Company's amended industrial zonal urbanism plan ("Industrial Area PUZ"), which designates an industrial zone under the footprint of the proposed new mine at Rosia Montana, expired during 2012. For one, the Company has obtained a new valid endorsement and, for the second, the Company is in dialogue with the relevant authority on the renewal process. Moreover, as a result of recent modifications to the law governing urbanism plans an additional endorsement has to be obtained, increasing the total number of required endorsements to 23. One equivalent endorsement for the zonal urbanism plan for the Rosia Montana historical protected area ("Historical Area PUZ") which expired in 2012 has now been replaced and consequently 10 out of the total of 13 endorsements necessary for its final approval have been obtained.-- In February 2013, the Romanian Parliament approved certain amendments, originally proposed in 2011, to the legislation concerning the approval of zonal urbanism plans, such as the Industrial Area PUZ. These amendments will come into effect after promulgation by the President of Romania and subsequent publication in the official gazette, the timing for which is unknown. These legislative amendments include the introduction of a new approach concerning the previous approval timeline for certain PUZs and set out a new basis for the construction of industrial facilities based on a General Urbanism Plan ("PUG") containing appropriate urbanism provisions. However, some uncertainties remain regarding the application of the new law in respect of the PUZ approval process. Pending clarification, the process for the approval of the Industrial Area PUZ may be amended and/or delayed further.-- The validity of the existing PUGs for Rosia Montana and Abrud has been extended, pursuant to local council decisions, through to July 2014. Furthermore, RMGC has obtained an extension to the validity of its urbanism certificate, UC-87, through to April 2013. On February 1, 2013, RMGC submitted documentation to Alba County Council for a new urbanism certificate.
Archaeology and Preservation of Cultural Heritage
-- The Company has continued maintenance work on 160 houses located in the historical center of the village of Rosia Montana ("Protected Area"), with the aim of preventing their deterioration. During 2012, the restoration of sixteen of these houses was completed and these are now in use. While these village houses are not designated as historic, the restoration will contribute to maintaining the character of the village.-- RMGC, in partnership with the local council of Rosia Montana, initiated the restoration of two iconic houses (the old school house and former town hall) in the Protected Area, along with the rehabilitation of a number of houses, which will be used for tourism initiatives. Subject to internal fit out, which has been placed on hold, the primary restoration of the former town hall was completed during 2012. Work on the old school house advanced to the stage of the building being secure and weather tight. Further restoration work has been put on hold until such time as the Government moves ahead with Project permitting.-- RMGC is continuing further archaeological work in the old underground mining galleries that lie under the Protected Area. This work has focused on opening up previously unexplored Roman galleries for public interest and will serve as a permanent museum, a visible testimony to the 2,000 year mining history at Rosia Montana. One such example is the Catalina Monulesti underground mining gallery which is in the process of being successfully restored and has been opened to the public. The Company has already hosted over one thousand visitors to the gallery, representing various stakeholder groups.
Corporate and Social Responsibility (CSR)
-- Gabriel takes pride in its commitment to achieving the highest levels of sustainability from workplace safety to community and environmental responsibility. It has a clear goal of attaining business performance through a dynamic process of continuous improvement in all aspects of its business and respecting all stakeholders. The Company invests significant resources into its CSR programs, which in Romania is a multi-dimensional commitment managed by RMGC covering employee training and safety, local communities, living traditions, direct and indirect social impacts, educational programs, environmental protection, community sponsorship and heritage aspects.-- One of RMGC's core commitments is to develop local employment, local supply and a strategy for local economy diversification during the life of the Project and beyond, evidenced through: -- Local employment - RMGC currently employs approximately 500 people directly and numerous others indirectly, with some 85 percent hired from the local community. The Company is investing in training and skills assessments for the construction phase of the Project; and -- Local supply - more than 600 local firms are suppliers / contractors to RMGC.
-- In November 2007 RMGC commenced an action to compel the Ministry of Environment ("MoE") to resume the EIA review, previously suspended. On June 19, 2012 the High Court of Cassation and Justice ordered that the file in respect of RMGC's original legal claim against the MoE should be returned to the Bucharest Court of Appeal to be reheard on its merits. At a hearing on January 14, 2013, the Bucharest Court of Appeal itself raised the question of whether the claim should be discontinued as a whole due to a lack of interest, based on the fact that the EIA review process had reconvened in September 2010. RMGC and the MoE informed the Court that they considered the action should be discontinued on such grounds and the Court admitted a motion of lack of interest. Accordingly, the actions against the MoE and its former officials have been discontinued.-- A case brought by RMGC to recover approximately 12.7 million RON (approximately $3.9m) in taxes, penalties and interest over the period January 2005 to June 2007 was resolved in RMGC's favor by the Bucharest Court of Appeal on May 10, 2011. The Romanian fiscal authorities submitted an appeal against this decision to the High Court of Cassation and Justice, an appeal which was irrevocably rejected by the High Court on March 13, 2013.-- Over the years certain foreign and domestically-funded non-governmental organizations ("NGOs") have initiated a multitude of legal challenges against licenses, permits, authorizations and approvals obtained for the exploration and development of the Project.-- The publicly stated objective of the NGOs in initiating and maintaining these legal challenges is to use the Romanian court system not only to delay as much as possible, but to ultimately stop the development of the Project. Often an action will be taken by the NGOs on a particular issue in several different regional court jurisdictions, and such legal objection may be raised in separate cases seeking a suspension or cancellation of a particular license, permit or approval, as is the situation with upcoming hearings for the first quarter 2013 summarized below. While a small number of these actions over many years have been successful, most have been, and continue to be proved to be, frivolous in the Romanian courts. Since early 2010 18 court decisions (from 19 legal challenges to permitting, licensing and other Project matters) have been positive for the progress of the Project.-- Cases concluded during the fourth quarter of 2012 included: -- A claim initiated by the Archaeological Restoration Association ("ARA") in the Alba Iulia Tribunal which sought to commence the procedure of classifying certain buildings from Rosia Montana as historical monuments was rejected at a hearing on February 3, 2012. This decision was appealed by the ARA, but such appeal was irrevocably rejected by the Alba Iulia Court of Appeal on October 3, 2012. -- An action commenced by two NGOs which sought the cancellation and suspension of UC-87 was dismissed by the Bucharest Tribunal on December 21, 2011. The NGOs appealed this decision, an appeal which was irrevocably rejected by the Bucharest Court of Appeal on October 15, 2012. -- An action initiated by two NGOs, which sought to compel the Alba County Authority for Culture and Patrimony and Minister of Culture and Patrimony to disclose the entire documentation submitted by RMGC in respect of the application for the Archaeological Discharge Certificate ("ADC") issued in July 2011 for the Carnic open-pit, was dismissed by the Bucharest Tribunal at a hearing on December 20, 2012.-- Upcoming hearings in the first quarter of 2013 include: -- A claim seeking the cancellation of the Strategic Environmental Assessment endorsement ("SEA") to the Industrial Area PUZ, which was issued by the Regional Agency for Environmental Protection of Sibiu in March 2011, is scheduled to be heard by the Cluj Tribunal on March 15, 2013. -- A request filed by three NGOs in the Cluj Tribunal seeking the cancellation of the ADC, issued in July 2011 for the Carnic open- pit, is scheduled to be heard on March 18, 2013. -- The next hearing of a claim by the same three NGOs in the Cluj Tribunal seeking the suspension of the ADC for the Carnic open-pit, is scheduled to be heard on April 5, 2013. -- An action before the Bucharest Tribunal, pursuant to which an NGO is seeking disclosure of certain documents pertaining to the Rosia Montana exploitation license, is scheduled to be heard on March 22, 2013. -- Two NGOs have also initiated proceedings before the Bucharest Tribunal seeking the cancellation and suspension of the ADC for the Carnic open-pit, the first hearing of which is scheduled for April 1, 2013.-- Due to the inherent uncertainties of the judicial process, the Company is unable to predict the ultimate outcome or impact, if any, with respect to matters challenged in the Romanian courts. In all circumstances, the Company and/or RMGC will vigorously maintain its legal rights and will continue to work with local, county and federal authorities to ensure the Project receives a fair and timely evaluation in accordance with Romanian and EU laws. However, there can be no assurance that the Company and/or RMGC will prevail in these matters. If any claims are not resolved in the Company's or RMGC's favor, then such a negative ruling may have a material adverse effect on the timing and/or outcome of the permitting process for the Project and the Company's financial condition. The implications of a negative court ruling will only be known once such a decision is issued and the position of the Government is assessed.
-- The Company's key objectives in the short term include to: -- Operate on a reduced cost basis until such time as the Government moves ahead with Project permitting; -- Continue efforts to increase the Romanian public and Government awareness of the Project benefits, both economic and otherwise, and the widespread support for the permitting of the Project (as demonstrated by the recent Referendum); -- Obtain approval of the EP and all other required permits that will allow construction activities to commence; -- Maximize shareholder value, while optimizing benefits of the Project to those in the community and the surrounding area.
The Technical Report was authored by Dr. Mike Armitage, FGS, C.Geol, MIMMM, CEng of independent consultants, SRK. Dr. Armitage is a Qualified Person for the purposes of the Technical Report, under the standards set forth by National Instrument 43-101 "Standards of Disclosure for Mineral Projects", of the Canadian Securities Administrators. The Mineral Resources and Mineral Reserve statements in the Technical Report are reported in accordance with CIM Standards. Dr. Armitage has consented to the public filing of the Technical Report and has reviewed and approved the extracts of, or summary from, the Technical Report within this news release, as applicable.
This press release contains forward-looking information as defined in applicable securities laws relating to the Company and/or the Project (referred to herein as "forward-looking statements") that are based on management's current expectations, estimates and projections. Specifically, this press release contains forward-looking statements regarding the returns to Romania from the Project and in respect of future permitting processes. All statements other than statements of historical facts included herein, including without limitation, those incorporated by reference, those which may refer to the Company's financial position, business strategy, plans, objectives of management for future operations (including development plans and objectives relating to the Company's business) the economic impact, job creation, costs estimates, patrimony plans, future ability of the Company to finance the Project, Project delivery and estimates regarding the timing of completion of various aspects of the Project's development or of future performance are forward-looking statements.
The words "believe", "expect", "anticipate", "contemplate", "target", "plan", "intends", "continue", "budget", "estimate", "projects", "may", "will", "schedule", "potential", "proposed" and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that are inherently subject to significant business, economic, legislative, political and competitive uncertainties and contingencies.
Forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors which are difficult, or may be beyond Gabriel's ability, to predict or control and that may cause the actual outcomes, level of activity, financial results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, without limitation, changes in the worldwide price of precious metals; fluctuations in exchange rates; legislative, political or economic developments including changes to mining and other relevant legislation in Romania; geopolitical uncertainty, uncertain legal enforcement; changes in, and the effects of, the government policies affecting the Company's operations; uncertainties related to timelines for awaited approvals; changes in general economic conditions, and the financial markets; operating or technical difficulties in connection with exploration, development or mining; environmental risks; the risks of diminishing quantities or grades of reserves; and the Company's requirements for substantial additional funding.
Accordingly, readers should not place undue reliance on forward-looking statements. Gabriel undertakes no obligation to update publicly or otherwise revise any forward-looking statements contained herein whether as a result of new information or future events or otherwise, except as may be required by law.
Gabriel Resources Ltd.
President and Chief Executive Officer
Mobile: +44 7798 801783
Gabriel Resources Ltd.
Chief Financial Officer
Mobile: +44 7823 885503
Mobile: +44 7802 875227
Gabriel Resources Ltd.
Mobile: +44 7810 437059